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Bankruptcy Security Clearance
September 9, 2014

Bankruptcy Security Clearance

Will I lose my security clearance if I file bankruptcy?

Can you lose your clearance? Yes. Will you? Likely not.

I have practice bankruptcy law here in Florida since 2003 and in Florida we have a lot of military bases and military personnel. These personnel either are active military or work directly for the government or through a company that has been hired by the government. Each has a security clearance of some sort. In this time I have never had a client who filed chapter 7 or chapter 13 bankruptcy lose their clearance by filing a bankruptcy. Most clients tell me that they have no chose. They either file bankruptcy and discharge the debt or reorganize their debt under chapter 13 or they are sure that with all the negative things they have on their credit and the amount of debt they have they will surely lose their clearance.

The circumstance leading up to the bankrupt have a lot to do with your ability to keep the clearance. During the background check / security clearance review you need to explain the circumstances that lead to the filing. This is your chance to show that they circumstances were beyond your control such as spousal job lose unexpected medical expenses. Click here for a related article.

General Rule: Bankruptcy Security Clearance & Background Checks

The general rule that I have followed is bankruptcy security clearance is long as you are filing the bankruptcy before the security clearings background check has started you will likely not lose your security clearance. Now I'm not telling you to file a few days before the security clearance starts. In a perfect world I would say file chapter 7 and get a discharge before it starts. Chapter 7 general takes 3-6 months to complete. In chapter 13 you are in for 3-5 years so I advise filing the bankruptcy at least 3 months before the security clearance background check begins so that you can show you have reorganized and taken care of the issues.

The Government just wants people working for them that are not stressed out and worried about their financial problems. If you file chapter 7 you take the worry away. In chapter 13 the worry is also taken away and under control. Happy employee = productive employee.

The best advice I can give is to talk to the JAG department, your superior officer or HR department before filing. Then if you feel comfortable about filing do it before the background checks start.

Ask Yourself these 2 Questions?

Would you want to hire or work with someone who owed over $30,000.00 in debt plus had a looming foreclosure about to take place or a person who just filed and completed a chapter 7 bankruptcy and was debt and worry free?

Do you think you have a better chance of passing the background check with a bankruptcy or with your current financial situation?